Since its founding, blockchain is the most secure and private form of payment. The idea of a decentralized network that records transactions and trades without any central authority is perfect. However, it’s still not that well though into by many in the crypto space . The market is in confusion with much fake news circulating. Investors wonders which coins to invest in, without basis of comparison as they’re not well known about cryptocurrency.

It’s understandable, the industry is new & so many innovative technologies which are  difficult to keep track. However, let me assure you that there are investors who understood the value of cryptocurrencies very early.

So the crypto market is still very much misunderstood and a lot of investors are not sure about what cryptocurrencies can do for them. As a result, there are still many fewer people investing in this space on a large scale compared to other asset classes.

Digital assets have been on a roller coaster ride since they became popular. However, as time passes and as more people become aware of the worth of this asset class, they will balance. This article aims to explain why the market might not separated from traditional markets for a long time.

Why is the Traditional Market and Crypto Market connected?

The traditional market and the crypto market are connected in many ways:

The traditional market is based on fiat money and stocks, the crypto market is driven by digital assets. Traditional financial institutions like banks and stock exchanges play a major role in this space. This means that cryptocurrencies have to be traded using these institutions or other electronic platforms that allow for trading. In other words, the traditional market is to use the crypto market as a platform to trade (buy and sell) stocks and other securities.

The traditional market consists of many laws and regulations that govern how it’s run. These rules can be very strict because of the nature of the financial world (for example, securities such as stocks and bonds are subject to different trading restrictions depending on their type). On other hand, cryptocurrencies can operate in a way that is almost free from these laws and regulations. This means that there is no government agency or regulatory body governing cryptocurrency-related activities like bitcoin mining.

In addition, many investors are using the crypto market as an investment vehicle that they can sell for fiat money. This is because the use of fiat money as a medium of exchange is far more widely accepted compared to the traditional market.

Why Decouple?

Decoupling means that two different systems have become independent. In this case, crypto and the traditional market have become independent from each other. This means that they can operate in a completely free manner. The reason why cryptocurrencies might decouple from the traditional market is due to the nature of their asset class itself.

Let’s take a look at why this may happen.

Decoupling of Traditional Markets

It’s no doubt that digital assets have experienced an unpredicted growth in terms of adoption. This growth is proved as of usage cases which are currently tested and implemented on the blockchain network. The impact of technology like AI and IoT is also growing massively, which is going to have a huge impact on the way we live and work.

With advancement in technology, there is a steady shift from centralized applications to decentralized applications. DApps have more of the focus. One of the most important features that DApps grasp on top of blockchain is smart contracts. Smart contracts are computer programs that facilitate, verify, and apply the negotiation or performance of an agreement between two parties based on pre-determined and fixed conditions.

Smart contracts is a useful tool in the blockchain ecosystem because it essentially automize the process of making transactions. They help to prevent any major errors by applying rules and legal agreements, hence removing the need for a mediator such as a lawyer or notary public. Smart contracts are used in coexistence with DApps to enhance the functionality and performance. This is why smart contracts have become more applicable over time, while at the same time, one of the most important features in the blockchain ecosystem.

The market have gone several major changes since its inception. There have been many technological innovations with advance technology, which brought about an uncommon growth in terms of adoption. It also become more accessible to all with less barriers.

Cryptocurrency use is growing at high rate, but the market still isn’t decoupled from traditional markets yet. This is because there are barriers that prevent cryptocurrency from decoupling completely. It’s all about breaking down these barriers one by one until it finally becomes a reality.

Barrier 1 – Cryptocurrency is more of a currency than an asset

The first barrier which is stopping cryptocurrency from decoupling with the traditional market is that the market is not as useable as currency at all. It is only used as an asset, which limits its potential and value in comparison to regular currencies such as USD, EUR, etc.

Due to the lack of adoption in the traditional markets, cryptocurrency is still not that well known by most traders and investors. As a result, they don’t know what to do with their investment and how to make it grow until it becomes big enough for them to generate profit .

Barrier 2 – Cryptocurrency is still too volatile for most traders

The second barrier that’s preventing cryptocurrency from decoupling with the traditional markets, is that cryptocurrencies are still very unstable. This means they are open to sudden movements of more than 5% in either direction, which is risky. When price goes up unexpectedly, traders fear & sell their crypto before market crashes.

In traditional markets, traders and investors understand that instability is a part of the game & a good thing as it provides investors way to make profits in long run. However, when it comes to cryptocurrency, most traders tend to panic sell when the price fluctuates by more than 5%. This will result in losing the investment if they don’t stay calm & wait for market recovery. This obviously does not give them a chance to grow their investment or make more profits from it.

Barrier 3 – Cryptocurrency market is still too new

The third barrier is that this asset class is still relatively immature. The usage of cryptocurrency market is not known if it will continue to grow as it is very young. Investors are in the dark when it comes to asset class and most don’t understand how to make money from cryptocurrencies.

Other Risks

With daily news of lost/unrecoverable wallets, cryptocurrency brokers lose client’s cryptocurrency, and many hacks that happened in the industry, investors are fearing to put their money in this asset class.

For example, in 2017 there are about $1.2 billion worth of cryptocurrency stolen due to cyber attacks. As cryptocurrency is the target of cyber attacks, hacks & theft, there is major doubts from traditional investors.

When will the Crypto Market ever decouple from the Traditional Market?

While it’s essential for investors to remain aware of the fact that crypto will eventually decouple from traditional markets, there are also several factors that can help grow this market.

The first factor is the acceptance of the payment system by the general public. People might accept digital assets as payments for goods/services but are still reluctant as they don’t know the benefits. As more people start using cryptocurrencies in everyday lives, the market get stronger.

The second factor is the mass adoption of blockchain technology in various industries. With blockchain, every transaction taking place on the network is confirm without having any third party interference. This means that there is no need for centralized authorities to verify transactions as they are all recorded on a decentralized network.

When it comes to mass adoption, best way to use cryptocurrencies is through an exchange where buying and selling become easy. Also, there are online exchanges allowing users to trade coins without going through third party such as a bank/credit card company.

Final words

Cryptocurrency market is not different from traditional market. When it comes to investing in cryptocurrency, people are doubtful. They still think that this market is too much of a risk for them to invest in.

This is understandable as when somebody puts money into asset they want the investment to generate good return. This makes it necessary for them to look out for other investments without putting in a position of high risk.

Cryptocurrency is a risky & not-stable asset class, however, cause investors to miss out on the very real opportunities that they would have taken advantage of. It’s important for investors to realize that market will somehow grow as more people become aware.